California bankruptcy laws: What are the Laws Regarding Bankruptcies in the State of California
Bankruptcy refers to a proper legal procedure wherein debtors are helped to settle their debts, which they are unable to pay otherwise. Simultaneously, the process helps the creditors to get their payments from whatever assets or properties owned by the concerned debtor.
It is not an easy decision to declare bankruptcy in California or any other state for that matter. While bankruptcy may appear to be the only choice for you, think about this decision properly as it can have a long term impact on you. Plus, it is not necessary that bankruptcy will clear all your debts. After all, there are some kinds of debts, which cannot be settled through bankruptcy.
You must also know that it is not always possible for bankruptcy to rescue your property or house. Hence, it is recommended to get in touch with an experienced bankruptcy lawyer in California and get suggestions on whether you should declare bankruptcy or not. As bankruptcy can exist in various forms, a certain kind may be more appropriate for you than the other. It is also possible that it is not the right solution for you at all.
To determine whether you should declare bankruptcy in California or not, it is essential to know the following:
- The kinds of debts that can be settled in bankruptcy;
- The bankruptcy type, which is the best choice for you;
- And the kind of alternatives that exist to file for bankruptcy.
As the federal law governs bankruptcy, it is the same in all the states. However, each state might have implemented different forms of exemptions. It means the assets one can keep while filing for bankruptcy can differ from state to state.
The Bankruptcy Act of 2005 categorically mentions that all individual debtors filing for bankruptcy on October 17, 2005, or after this date should go for a credit counseling session within six months before declaring bankruptcy, as well as finish an instructional course in financial management after they file bankruptcy.
Mean test in California for bankruptcy
Also, under the same Bankruptcy Act, the expenses and incomes of an individual debtor will be assessed to ascertain whether they are eligible to file Chapter 13 or Chapter 17. To apply this test, the courts in California will analyze your mean income for the six months before filing bankruptcy and then draw a comparison with California’s median income. In case, the income of the said debtor is below the state’s median income; the debtor may opt for Chapter 7. On the other hand, when his/her income is more than the state median, the rest of the mean test can be applied to ascertain whether they should file Chapter 13 or Chapter 7 bankruptcy.
Preparing the paperwork
To start the bankruptcy process in California, you should itemize all your existing sources of income, key financial transactions made during the last two years, debts-both unsecured and secured, property-all possessions and assets along with real estate, and monthly living expenses. It is also imperative for you to collect your last two years’ tax returns, titles of your car(s), and documents for any loans taken by you, and any real estate owned by you.
After collecting all the information mentioned above, you need to ascertain than the properties that you believe can be immune from seizure depending on the California exemptions. The above-listed information can be either collected with the support of an attorney or on your own.
To do the actual filing, either your lawyer or you should file a 2-page legal petition along with many other forms at the California district court for bankruptcy.